July 11, 2023: Microsoft president Brad Smith has revealed that following the court decision, both Microsoft and the UK CMA have agreed to a stay of litigation over the CMA’s blocking of the deal, to work on proposals to get an agreement reached.
The FTC’s injunction against the Microsoft acquisition of Activision Blizzard, which would include the purchase of Call of Duty, Diablo, Overwatch, and World of Warcraft, has been denied by the California District Court. This means that the almost $70 billion deal is one step closer to reality. The court says that Microsoft has suitably addressed concerns about Call of Duty and other upcoming games not coming to PlayStation and Nintendo consoles, as well as questions regarding Game Pass and cloud gaming, and has now dismissed the FTC’s injunction.
Court documents from the United States District Court of the Northern District of California outline that Microsoft has won the case brought against it by the US Federal Trade Commission (FTC), which was seeking to block the Xbox owner’s acquisition of Activision Blizzard owing to concerns regarding lessening of competition in the videogame industry.
With the FTC injunction dismissed, one of the biggest roadblocks for the $69 billion buyout of the World of Warcraft, Overwatch, Call of Duty, and Diablo maker is removed.
“Our merger will benefit consumers and workers,” Activision Blizzard CEO Bobby Kotick says in a statement issued to PCGamesN. “It will enable competition rather than allow entrenched market leaders to continue to dominate our rapidly growing industry.”
In a document published on Tuesday, July 11, the California North District Court outlined why it has denied the FTC motion to prevent the acquisition.
“Four weeks ago, the FTC filed this action to preliminarily enjoin the merger pending completion of the FTC administrative action,” the document outlining the denial of the FTC’s push reads.
“Because the merger has a July 18 termination date, expedited proceedings were commenced. After considering the parties’ voluminous pre-and-post-hearing writing submissions, and having held a five-day evidentiary hearing, the Court DENIES the motion for preliminary injunction.
“The FTC has not shown it is likely to succeed on its assertion that the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the videogame library subscription and cloud gaming markets.”
As also outlined by the courts, the deal “deserves scrutiny,” which it also says has “paid off.” Since announcing the deal, “Microsoft has committed in writing, in public, and in court to keep Call of Duty on PlayStation for ten years on parity with Xbox.”
Microsoft also made an “agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements to, for the first time, bring Activision’s content to several cloud gaming services.”
“For the reasons explained” the document continues, “the Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content. The motion for a preliminary injunction is therefore denied.
“Because the decision on the FTC’s request for a preliminary injunction ‘effectively terminates the litigation and constitutes a final order, this case is dismissed.”
Xbox Gaming CEO Phil Spencer has also responded to Microsoft’s success in the case, saying, “We’re grateful to the court for swiftly deciding in our favor. The evidence showed the Activision Blizzard deal is good for the industry and the FTC’s claims about console switching, multi-game subscription services, and cloud don’t reflect the realities of the gaming market.”
Following the ruling, Microsoft president Brad Smith issued the following statement, as seen by PCGamesN: “We’re grateful to the Court in San Francisco for this quick and thorough decision and hope other jurisdictions will continue working towards a timely resolution. As we’ve demonstrated consistently throughout this process, we are committed to working creatively and collaboratively to address regulatory concerns.
“After today’s court decision in the U.S., our focus now turns back to the UK. While we ultimately disagree with the CMA’s concerns, we are considering how the transaction might be modified in order to address those concerns in a way that is acceptable to the CMA. In order to prioritize work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of the litigation in the UK would be in the public interest and the parties have made a joint submission to the Competition Appeal Tribunal to this effect.”
While the EU has approved the Microsoft acquisition of Activision Blizzard, the UK’s Competition and Markets Authority has “prevented” it, which looks to be changing.
With the CMA’s decision still standing, the California District Court’s decision does not guarantee that Microsoft’s purchase of Activision Blizzard will be successful. It does however represent the removal of a major roadblock.